bargain hunting is a good strategy in the short term at various support levels to build long positions, NS Ramaswamy said.

Precious metals for the last couple of weeks have been weak mainly due to regaining strength in the dollar against its peers. On February 2, 2023, gold slipped around 5 percent from a peak of Rs 58,847 on MCX to Rs 55,850. Comex Gold had a larger impact of a 6.48 percent fall from $1,960 to $1,833. Silver too had an impact, sliding around 10.88 percent from highs of Rs 72,769 to Rs 64,850, said NS Ramaswamy, Head of Commodities at Ventura Securities.

“The strengthening of the dollar index this month was after the US Fed chief’s hawkish comments on interest rates. US non-farm payrolls rose 5,17,000 for January caught everyone off guard as numbers were way above the consensus of 1,88,000. Retail sales data also jumped 3 percent in January, which was also above expectations. All these point towards a positive dollar in the coming days as the Fed hikes interest rates. The strength in the dollar and treasury yields have pressurised non-yielding assets like gold in the short term,” he added.

On any indications of the Fed’s action to officially pivot, we would have the US 10-year yield coming down further which could lead to higher gold prices.

“Inflation is very high and is likely to stay for a couple of quarters. Gold must eventually reap the benefits of rising inflation. For gold to move higher, it’s all about data like the US interest rates, inflation or geo-political event to drive it. If inflation is not seeing any signs of cooling, then this year remains promising for gold to perform,” he added.

Gold prices are trading lower amid pressure from rising short-term yields. US rate hikes and hawkish signals from Fed added to the sentiment. Recent unemployment claims data against strong non-farm payrolls gave a mixed reaction as well. The dollar index recently broke an important resistance near 104 giving room to move towards its resistance levels near 106 -108 levels.

MCX Gold is expected to correct to levels near Rs 54,500 with immediate resistance near Rs 57,000. So far as the USD-INR pair remains elevated and the rupee doesn’t appreciate, there is protection to gold in rupee terms while Comex Gold is expected to be bearish and range bound taking support at $1,800, below which there is immediate support at $1,785 and strong support at $1,755, Ramaswamy added.

He further said, investors should prefer to be on the sell side of gold in the short term till April 2023, keeping in view the sentiments and the global noise around various economic data. On the other hand, bargain hunting is a good strategy in the short term at various support levels to build long positions.

“We expect MCX Gold to trade between Rs 59,000-60,000 and Comex Gold around $1950-$2000 in the medium term,” the analyst said.

The author is Head of Commodities, Ventura Securities

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